A common method to study the dynamic behavior of macroeconomic variables is using linear time series models; however, they are unable to explain nonlinear behavior of the series. Given the dependency between stock market and derivatives, the behavior of the underlying asset price can be modeled using Markov switching process properties and the economic regime significance. In this paper, a two-...

This paper combines the Heterogeneous Autoregressive Realised Volatility (HAR-RV) model and Markov Regime Switching (MRS) approach to estimate forecast volatility of energy futures contracts traded at Tokyo Commodity Exchange (TOCOM). The proposed MRS-HAR-RV allows dynamics realised change as market conditions change. dataset consists intraday prices for gasoline, kerosene crude oil futures. Es...

In this article, we develop one- and two-component Markov regime-switching conditional volatility models based on the intraday range evaluate their performance in forecasting daily of S&P 500 Index. We compare with that several well-established return- range-based models, namely EWMA, GARCH, FIGARCH GARCH model, hybrid EWMA CARR model. in-sample goodness fit out-of-sample forecast using a compr...

The current paper proposes a conditional volatility model with time varying coefficients based on a multinomial switching mechanism. By giving more weight to either the persistence or shock term in a GARCH model, conditional on their relative ability to forecast a benchmark volatility measure, the switching reinforces the persistent nature of the GARCH model. Estimation of this volatility targe...

This paper thoroughly investigates the price dynamics of carbon spot and futures returns for the first commitment period ranging from 2008 to 2012 with the aim to develop an adequate spot-returns-model. We apply a broad spectrum of various GARCH models including different distributions for model innovations. Both time series, spot and futures returns, exhibit asymmetric behavior in their varian...

Abstract While prior studies have examined the predictive effect of macroeconomic and country risk components on property stock index dynamics, limited explanations exist in literature regarding time-varying investor sentiment housing prices. Accordingly, this study assesses impact properties’ returns conditional volatility price indices under different market conditions, using GARCH, GJR-GARCH...

This paper uses simulation-based portfolio optimization to mitigate the left tail risk of portfolio. The contribution is twofold. (i) We propose Markov regime-switching GARCH model with multivariate normal tempered stable innovation (MRS-MNTS-GARCH) accommodate fat tails, volatility clustering and regime switch. each asset independently follows regime-switch model, while correlation joint model...

The purpose of this study is to investigate the impact of exchange rate misalignment on inflation persistence. For this purpose, Vector Auto Regression method and Markov Switching model is used for quarterly data during 1989:4 -2014:3. The results show that, the impact of liquidity growth and exchange rate misalignment on inflation persistence is positive. On the other hand, GDP growth has a ne...

T he main purpose of this article is to analyze exchange rate behavior based on monetary fundamentals in the context of Iranian economy over the period 1990:2 to 2014:3. To do so, two monetary exchange rate models is investigated, the first by regarding interest rate differential as a monetary variable, and the second one regardless of interest rate differential as a monetary variabl...